Monday, August 22, 2011

So I ask, where are the numbers? They should be releasing the nice 'Sunshine' deal from Amazon (June) numbers right now. I speculate that between the Borders debacle and Amazon's sale, the numbers make print look worse than the long term trend.

If you look at Robin's article, we should expect another holiday shift. The interesting bit is that since this is now international (US, UK, Germany for Amazon and soon India), this will provide many opportunities for sales in the future.

But where are the AAP numbers? Hope is not a strategy...

Neil

ps
Anyone else think the numbers will be even more convoluted than last month's release (see last link).

"Digital sales across all RH companies for the first half of 2011 have already exceeded their total for all of 2010, Dohle noted. In the U.S., digital sales accounted for over 20% of revenue, and RH has more than 27,000 titles available in e-book formats worldwide. "

There is more worth reading in the above link. I think Random House has been wise in its aggressive move to digital. But they are only doing average for the AAP publishers in ebook market share (See last month's sales numbers and market share

On average in 2011 ereader owners are buying 70% of the books per ereader as 2010 ereader owners. This is better than I expected! It means 2010 ereader buyers are still buying despite a 'too be read pile.' It also means that while, on average, new 2010 ereader buyers are not spending as much (at least on AAP books), they are not slackers in ebook buying either. So can we see further ebook buying acceleration in 2012?

Let me define acceleration. I do not mean that sales just increase, but that the *rate* of sales increase is greater than the prior year. Please look at this chart I put on on May ebook sales:

Let's estimate ebook sales in 2012 off prior years. (Use the red lines as a guide.)

If we estimate off AAP ebook sales in 2010: $100 million per month in 2012.
Off AAP sales in 2011: $150 million per month in 2012
Off my estimate of total ebook sales in 2011: $200 million per month in 2012!

So acceleration of sales means ebook sales faster than $200 million per month in 2012. :) Can that happen?

First criteria is devices to read on. E-ink has two factories now. One of the two factories is new, so it isn't up to speed. I can only do a 'thumb in the wind estimate,' but I would guess e-ink could slightly more than double e-ink screens in 2012. Perhaps 2.5X the screens of 2011. So e-ink alone could accelerate sales!

But there is also Mirasol from Qualcomm.
http://www.mirasoldisplays.com/

A new factory with new screen capabilities. So we could see 3X the ereaders in 2012 that we see in 2011.

The next need is the ratio of ebook sales to ereader sales. I expected that to drop far more than it has in 2010. 70% as many dollars of ebooks per ereader is great. I would have guessed 50% to 75% is a really optimistic turn out. A tripling of ereader sales plus the prior year sales to generate 200% to 300% of the ebook sales. I'm happy with 280%, but at some point 'less intense readers' will be the normal ereader buyer.

Low end is in 2012 double the ereader sales with a ratio of 50% is (2X+1X)*50%=150%. Or about $150million/month a year from now. So the low end is no acceleration in ebook sales, but no decline. If this happens, expect peak ebook sales to be 60% to 65% of the market (noted by the lack of ebook sales acceleration). I do not expect this scenario.

High end is a tripling of ereader sales again with a ratio of about 65%. (The ratio will always go down.) or (3x+1x)*65%=260% or ~$250million/month (realize we're working with approximate numbers here). Under this scenario ebooks will break 90% of the book market quickly. A little too ambitious in my opinion.

So either ereader sales will drop from the tripling of sales per year or the ratio will drop. We can bracket 2012 ereader sales at 2X to 3X 2011 ereader sales. We can bracket the ratio of ebook dollars per ereader (ignoring ereaders from prior years, assuming they get replaced) at 50% to 65%.

We can also know that both will not be at either their high or low extremes. What will they be? It is anyone's guess.

What I do know is that about a year from now I can tell you the approximate ebook market share in 2017. (Technical diffusion follows a pattern.)

With Amazon discounting the K3 to $114, I expect a K4 soon and in either September or October the 'Kindle tablet.' B&N just received a lifeline that I expect to be invested in further Nook devices. Apple, Kobo, Sony, and Google will all remain active in the market too.

Sunday, August 14, 2011

My parents had a TRS-80
Then mom needed an IBM 5150Then in college, I borrowed Mac (friends or the universities)
In grad school I bought a 'clone PC' or utilized Sun workstations.
That clone PC went through two hard drives, three motherboards, two monitors, and three video cards. But like an axe where you replace the handle or the head, it was the same. :) Then I went through a pair of laptops. Both of which have helped me buy ebooks.

The 5150 was huge. Without 'the PC,' I doubt computers would be where they are today. It took someone to jump start the industry. It wasn't the first computer nor the last; but it launched an industry. Much like the Amazon Kindle. ;)

My point? Lead, follow, or get out of the way. IBM didn't control any of the software and that pushed them out of the business. Amazon, Apple, Nook (B&N), and Kobo all control the keys to their media. So I wonder if this generation of technology wouldn't be a bit more resistant?

I give the advantage to Amazon. As with the 5150, those were bought because they were a safe bet. With Amazon, their software (ebooks) will run on any platform/OS that will let them. I know of more than a few people who have bought Kindles as it was:
1. Cheap (like the 5150 vs. other business computers)
2. Portable software (5150 to Compaq, Kindle to an app)
3. Market leader (there is a group that feels safe in the pack)

You might be going, why advantage to Amazon? I know of a few who didn't buy Ipads due to 'being locked into the ecosystem.' Amazon isn't doing a 'hard lock.' More of a 'convenience lock' which customers are happy with. For example, there is a reason Netflix is so popular; you don't have to buy their device.

We owe much to the 5150. Without it, there wouldn't be e-readers (in my opinion). 30 years of PCs. It seems like more.

5. Software profits (e.g., for Amazon, B&N, and Apple) Do I really need a link for my typical audience? In the long run the profit will be in the media, not the device. Thus vendors will cut profits.

6. Size. I wonder why no vendor has come out with a fractionally smaller e-reader? There is nothing magical about 6" or 7" screens. Oh, 3.5" is too small (too many page turns), but some middle ground would sell.

7. Cell Phones. Sales of these are exploding. Why isn't there an ereader cellphone subsidized by the carriers? Seriously, we've already had the 3G e-readers for $189. Increase the battery size a little and the ereader could be a free cellphone with data plan on any US cellphone network.

In conclusion:
I keep reusing this link. One item to note again and again is the 'elastic market' of ereaders. Look at the bottom of page 22. Currently over 53% of the potential ereader buyers are 'priced out' of the market. Note: That isn't the only growth; there is a huge market considering ereaders who remain on the fence. Ideas like Amazon's offers will further cut the price.

Ereaders are an elastic market. While some of us want higher end devices, there needs to be a gateway drug.

Thursday, August 4, 2011

Huffington post notes how indie authors are using their success to go to publishing.

"It is for this group especially that e-books are so important, as they have essentially become a "gateway drug," enabling successful indie authors to stroll down the path into the welcoming arms of traditional publishers."

Of the five examples, #1, #3, and #5 were 'was sold to Amazon's Thomas & Mercer'

Read the article on David's blog. Here is what struck me. Indie authors seem to respect "Joe Konrath has explained the power of an Amazon marketing push, something they don’t restrict to new titles, unlike most publishers." Yes, pbooks are marketing. Authors want simple contracts without 'non-compete clauses.' If they're going to risk pbooks, they want marketing.

My concern with Thomas & Mercer was their ability to put books into stores. With the quantity of best selling authors signed, the concern is 'can bookstores afford to not stock their titles?'

Amazon needs to slow the growth of opposing ereaders. This means launching new devices at low price points. Amazon also needs to tap into a *large* app market. Hence the Android rumors...

Apple needs to launch new devices at lower price points. For readers this means a smaller and lighter device than the IPad2 with a more readable screen than the 3.5" IPhone. Rumors are Amazon will counter with a 6" touchscreen... Cheap and readable... I'm curious to see Job's new products this Christmas.

Both should either launch new subsidiaries (e.g., Amazon India) or form partnerships (Google with Android with Samsung, HTC, MMI, ZTC, Sony, your uncle Joe, and probably Amazon.) All it takes is one partner to pull the others into a larger market...

The next few years will be huge for ereaders. For now, it seems to be the English reader market; I suspect due to book supply. The winner will be the one who can supply the most books in a way that is easy to connect the reader (buyer) with the book being sold.

My main point is *all* of the ereader competitors have become complacent. B&N seems to be the most nimble on devices, but where is their entry into more foreign markets? Kobo seems to be the most nimble internationally; they just need to get the name out. Amazon's Kindle and Apple's products have 'mindshare,' now offer more devices to 'grow from strength.'

I'm curious to see what hits the market this back to school season and Christmas.

About Me

I love to parent, read, ski, travel, and scuba dive. I've switched from blogging about real estate to ebooks. As much of an optimist as I've been on ebooks, their growth is typically better than my predictions! My main prediction is 50% ebook market share by end of January 2013.
Any of my charts may be re-used with just a link to this blog (blog or specific post is up to whomever borrows the graphs).
Neil